At the time of writing this QB, the primary US share market index, the S&P 500, had just closed at a new record high of 4994. Indeed, this bull market has surged since it turned the corner on 12 October 2022, when the new bull market began. But as the old traders like to say, “Bull markets climb walls of doubt.” Many have remained sceptical of this bull because it is allegedly narrowly based on the so-called ‘Magnificent Seven’ mega-cap tech stocks (Apple, Microsoft, Alphabet, Meta, Amazon, Nvidia and Tesla).
The naysayers say that this market advance is too narrow to be a real bull market and that its narrowness makes it vulnerable to a reversal. Reference is made to the Tech boom of 2000, which evaporated rather quickly, and also to the ‘new, new thing’ of AI being a fad that has captured attention but does not amount to a valid structural change.
However, the sceptics are not giving the bull market due credit. While it’s true that a handful of leading tech names have had huge gains since October 2022, plenty of other stocks have posted solid double-digit gains as reflected in the 11 sectors of the S&P 500 (see the chart below). The index itself is up 39% since October 2022, the IT sector is up a staggering 80%, Communication services are up 69%, Industrials are up 37%, Consumer Discretionary is up 30%, and Financials are up 29%. Still struggling to catch up with the pack are Materials (up 21%), Real Estate (up 12%) and Utilities (down 1.7%).
Source: Ed Yardeni
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